Industry running scared of cut-price eastern competition

Manufacturers are slashing costs in a desperate effort to ward off what they see as growing threats from China, India and Eastern Europe, according to the latest report from the Engineering Employers Federation (EEF).

Manufacturers are slashing costs in a desperate effort to ward off what they see as growing threats from China, India and Eastern Europe, according to the latest report from the Engineering Employers Federation (EEF).

To counter this threat, UK companies are adopting a twin track approach of an increased focus on innovation and outsourcing abroad to lower costs. According to the EEF almost half of manufacturers said that more production would take place outside the UK over the next five years, with the primary reason being to achieve cost reduction (86 per cent). A further one-fifth were considering outsourcing. In addition, two-thirds of companies said their dominant focus was on increasing innovation, with 46 per cent saying they were also developing niche markets and customising their products.

Commenting on the survey, the EEF's director-general, Martin Temple, said: "These results prove that manufacturers are well placed to succeed in an increasingly competitive environment by adopting strategies which focus on adding value in the UK, while making best use of the options that low-cost manufacture overseas gives them."

"However the figures provide a stark warning that the low-cost economies of the east are arriving like an express train. If UK and EU policymakers do not commit to measures that will free up enterprise and make their economies more dynamic, there is a danger the eurozone will be left standing on the platform. We must ensure that companies who go down this route are doing so as part of a long-term business plan and not because they perceive the UK as a poor location for manufacturing."

On a rating of 1 (negative) to 5 (positive) the UK scored below 3 on five out of six competitiveness indicators - transport, planning, other business costs, taxation and regulation. Only skills availability was regarded as having a neutral impact on businesses. Regulation was seen as the most negative factor in the UK.